The market for business applications was worth $5.4 billion globally in 1996 and is
growing at a 50 percent rate, according to IDC. The market is dominated by
Germany's's SAP AG, while Oracle, PeopleSoft Inc. of Pleasanton and Baan Co.
N.V. of Menlo Park follow far behind.
''People are buying databases because they buy an application,'' Tholemeier said.
''If you lose the applications business you lose revenue and you lose strategic
market share against competitors.'' Locking in a customer with a database and the
business applications software also guarantees ''no-brainer'' sales of upgrades,
add-ons and services, Tholemeier said.
Oracle also could be suffering from its position as both a database and an
applications vendor. Companies such as SAP, PeopleSoft and Baan typically team
up with a database company and sell their products as an overall package, and they
could be pushing the products of Oracle's competitors, who do not compete with
them.
''They need to make a decision as to whether their applications business is going to
reward them well enough to make up for the fact that it undermines their
relationship with the package application vendors,'' Olofson said. ''Up to now, they
have believed they can balance those things. Maybe they need to take a second
look at that.''
From 'buy' to 'sell'
All but two of 26 analysts who follow Oracle started the week with ''buy''
recommendations. Now all but three have downgraded the stock, although many
say the company's long-term prospects are good.
Investor attention in the short term is likely to focus on Oracle's competitors to see
if they are benefiting from the giant's troubles or are suffering along with it.
PeopleSoft, Baan and SAP, who report fourth-quarter earnings in the middle of next
month, each lost only a few percentage points Tuesday.
''They see no sign of a slowdown,'' says Salomon Smith Barney software analyst
Andrew W. Roskill. ''They seem very bullish for the outlook for the rest of year.''
Darby Dye, investor relations manager for Baan, agreed: ''We see nothing that
would indicate that we're off-track.'' |
